A coalition representing some of the most important on-line sportsbooks within the United States has taken authorized motion towards town of Chicago, difficult a brand new tax and licensing framework included within the metropolis’s 2026 price range. The lawsuit, filed Tuesday in Cook County Circuit Court by the Sports Betting Alliance, seeks to cease Chicago from implementing a ten.25% tax on sports activities betting income generated inside metropolis limits, together with new native licensing necessities for operators.
The ordinance was scheduled to take impact Thursday, coinciding with the beginning of the 2026 fiscal yr. Under the plan accredited by the City Council earlier this month, sportsbooks would want to acquire city-issued licenses and pay the brand new tax on adjusted gross receipts tied to bets positioned in Chicago.
Sportsbooks Challenge City’s Authority
In its court docket submitting, the Sports Betting Alliance argues that Chicago lacks the authorized authority to impose both the tax or the licensing system. The group represents a number of main operators, together with DraftKings, FanDuel, BetMGM, bet365, and Fanatics Betting and Gaming.
The grievance states, “The State — not the City — has sole authority to license and tax online sports wagering in the State of Illinois.” It continues, “The Illinois Constitution reserves authority over licensing for revenue and income-based taxation to the State unless expressly delegated. The Illinois General Assembly has never authorized the City to impose licensing fees or income-based taxes on online sports wagering.”
According to the lawsuit, Illinois’ Sports Wagering Act doesn’t allow municipalities to layer extra taxes or licensing necessities on high of the state’s current regulatory construction. Sportsbook operators already pay between 20% and 40% in state taxes, relying on income ranges, in addition to per-wager charges of 25 cents on every of the primary 20 million bets and 50 cents for every wager past that threshold.
Licensing Timeline and Legal Maneuvers
The Sports Betting Alliance initially sought a short lived restraining order to dam enforcement of the ordinance earlier than it took impact. The group argued that the brief window between the City Council’s Dec. 20 price range approval and the Jan. 1 implementation date left operators with no clear path to compliance.
The grievance mentioned that as of Tuesday, town had not issued any licenses, forcing sportsbooks to resolve whether or not to “operate without a City license or cease online sports book operations entirely within the City” as soon as the calendar turned to 2026. The alliance warned that such a state of affairs might push bettors towards unlawful and unregulated playing choices.
The lawsuit states, “Because those alternatives are untaxed, forcing SBA members to ‘go dark,’ would deprive Illinois, and, derivatively, Chicago, of significant revenues under existing state tax laws from online sports wagering that has been legal in Illinois and in Chicago since 2019.”
On Wednesday, after Chicago issued licenses to the alliance’s member operators, the SBA withdrew its request for a short lived restraining order. A spokesperson cited by ESPN confirmed that whereas the emergency movement was dropped, the underlying lawsuit will proceed.
Budget Stakes and Political Response
Chicago officers have mentioned the brand new tax is anticipated to generate about $26 million in income subsequent yr. Mayor Brandon Johnson proposed the measure as half of an effort to steadiness town’s price range. The City Council in the end handed the spending plan with out the mayor’s assist, and Johnson introduced final week that he would enable the price range to take impact with out his signature.
City officers didn’t instantly reply to requests for touch upon the lawsuit, and a metropolis spokesperson mentioned the administration had not but obtained the submitting and wouldn’t touch upon pending litigation.
At the state stage, some lawmakers have already moved to counter Chicago’s strategy. State Rep. Daniel Didech, a Buffalo Grove Democrat who chairs the House Gaming Committee, launched laws in October that may explicitly prohibit native governments from regulating, licensing, or taxing sports activities betting.
“When the legislature legalized sports betting in 2019, it was never our intent to allow local governments to create their own rules for this industry,” Didech mentioned in a press launch. “Chicago’s proposal will hurt consumers, drive vulnerable people to predatory illegal markets, and reduce state tax revenue. The city should work collaboratively with the state to ensure sound, informed policy decisions are made on this issue.”
That invoice has not but superior to a vote. Separately, State Sen. Patrick Joyce of Essex has proposed laws that would cut back Chicago’s share of state revenue tax distributions primarily based on how a lot income town collects from its personal sports activities betting tax.
Illinois lawmakers are anticipated to return to Springfield in mid-January, because the authorized battle over Chicago’s sports activities betting ordinance continues.
